Biggest Oil Cos Need to Find 22MM Bpd by 2040

Wood Mackenzie analysis reveals that 30 of the world’s largest oil and gas companies face a combined 22 million barrels of oil equivalent per day production shortfall by 2040 to maintain their market share of oil and gas demand.

That’s what Wood Mackenzie stated in a release sent to Rigzone on Thursday. In that release, Wood Mackenzie noted that the group of 30 companies collectively produces around 50 million barrels of oil equivalent per day, meeting close to 30 percent of global demand, but added that its latest report expects production from current commercial projects for these 30 companies to fall nearly 40 percent between 2025 and 2040.

“Filling the 22 million barrels of oil equivalent per day gap is the equivalent to adding nearly two Permian basins or 14 Guyana-scale plays,” Wood Mackenzie highlighted.

“The main industry players can’t spend their way out of the problem,” the company warned.

“With capital discipline and shareholder distributions now a defining feature of how companies are valued, in what is fundamentally a maturing sector, companies are under pressure to return between 30 percent to 50 percent of operating cash flow to shareholders through dividends and buybacks,” it added.

In the release, Neivan Boroujerdi, Director, Corporate Research at Wood Mackenzie, said, “Big Oil is recalibrating back to upstream, but years of reduced activity has left many oil and gas companies with production profiles more aligned with net zero pathways than the higher for longer scenario that is playing out”. 

“The core strategic challenge is how to sustain output and cash flow when reinvestment rates are roughly half of mid-2010s levels,” Boroujerdi added.

“Not every company will succeed, making further industry consolidation inevitable. Fundamentally, companies will need to deploy every tool in the playbook to square the circle,” he continued.

In the release, Wood Mackenzie noted that, in 2015, the same cohort faced a production gap of 11 million barrels of oil equivalent per day to grow production in line with demand to 2030.

“They closed it, delivering an additional 19 million barrels of oil equivalent per day through exploration, M&A, new projects and increased recovery,” Wood Mackenzie said.

“U.S. tight oil expansion and Chinese NOC upgrades to their domestic outlooks dominated. But barring the emergence of a new Permian-scale play, this is unlikely to be repeated,” it added.

Even if companies replicated that performance out to 2040, they would still fall three million barrels of oil equivalent per day short of what’s needed to maintain their market share of oil and gas demand, Wood Mackenzie warned in the release.

“And there are now fewer options to fill the gap,” it said.

“U.S. tight oil production is plateauing. Many of the most attractive corporate M&A targets have been snapped up and big resources holders such as Saudi Arabia, Russia, and Iran remain closed to foreign investment,” it added.

The industry can deliver the supply needed to meet peak demand and beyond, according to the analysis. Less certain is which companies are best placed to deliver it and how they maintain their share of global supply, Wood Mackenzie stated.

“Companies will need to deploy every tool in the playbook to align the needs of investors while addressing the longevity challenge in oil and gas,” the company said.

Wood Mackenzie noted that its analysis is based on its Corporate Strategy and Analytics Service.

“The peer group of 30 companies spans major integrated oil companies, national oil companies from importing countries (excluding Middle Eastern resource holders), international oil companies, and North American E&P firms,” Wood Mackenzie highlighted in the analysis.

In OPEC’s World Oil Outlook (WOO) 2025 report, OPEC Secretary General Haitham Al Ghais states that, out to 2050, OPEC sees oil demand continuing to expand and reaching 123 million barrels a day.

“For the oil industry alone, we see global oil industry investment requirements of $18.2 trillion out to 2050,” Al Ghais notes in the report.

“It is vital that these investments are made for consumers and producers everywhere, as well as for the effective functioning of the global economy at large,” he adds.

To contact the author, email andreas.exarheas@rigzone.com